The Senate-passed immigration bill exempts millions of non-American workers from the health insurance mandate imposed on most Americans. Thus employers would not be penalized for failing to provide them with health coverage, making the newly legalized workers much cheaper to hire. See the problem?

Most of the discussion about health care in the Senate’s immigration bill—known as the Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 (S. 744), which passed the Senate on June 27 by a vote of 68 to 32—has been to ask whether those who are given temporary legal status would get the same subsidies available to millions of lower- and middle-income American workers. And the answer is no—or at least they aren’t supposed to.

But the immigration bill also exempts those given that new immigration status, referred to as a “registered provisional immigrant” (RPI), from having coverage.

What has not received much attention is how the employer mandate to provide coverage and the RPI individual exemption from having coverage could affect hiring practices. (See the National Immigration Law Center’s summary here.)

The employer mandate to provide coverage, recently postponed for one year, significantly increases the cost of hiring a new employee. But that economic pain will be felt disproportionately by employers who hire lots of low-skilled, lower-income workers. That’s because the cost of coverage, which varies little across income levels, would be a much bigger percentage of a lower-income worker’s wages.

For example, according to the Kaiser Family Foundation, the average cost of employer-provided (PPO) coverage for just the worker was $5,850 in 2012, with workers contributing on average 18 percent of the premium and employers paying 82 percent. Family coverage was $16,356, with workers contributing 28 percent and employers 72 percent.

If an employer being forced to provide coverage to workers making $20,000 pays, say, 75 percent of the employee’s premium, that’s about $4,400, or 22 percent, over and above that $20,000 income.

The employer mandate means that companies hiring lots of lower-income workers could face a cost of $4,000-plus (depending on the employer’s contribution level) per full-time American employee. Alternatively, they would have to pay a $2,000 per-employee penalty for not providing coverage ($3,000 under certain conditions).

On the other hand, if employers hire the newly legalized immigrant workers, they don’t have to provide them with coverage (as long as they aren’t providing any similarly situated employee with coverage). Plus employers avoid having to pay the penalty for not doing so, making RPI workers between roughly 15 percent to 25 percent cheaper to hire. That’s is a huge economic incentive to hire the registered provisional immigrants, and a disincentive to hire Americans.

However, that disincentive primarily affects only lower-income RPI workers. Employers struggling to fill highly skilled jobs, like those open in the technology industry, are pushing for a big expansion of H1-B visas. And the Senate bill does that—which is good news, though the Senate bill doesn’t go far enough.

But that expansion would have virtually no impact on American workers because so many of those jobs are currently unfilled due to a lack of qualified applicants. Plus, those companies already provide health insurance.

Thus, while it was surely not the Gang of Eight’s intention in crafting the legislation, the Senate bill would likely cost millions of low-income Americans their jobs because of the economic advantage it gives to hiring newly legalized workers instead.

And although the House is looking to take a different direction in its version of immigration reform, if it produces one, it will have to grapple with the same issue. It’s ObamaCare that is causing the problem, not immigration reform.

One solution would be to require RPIs to have health insurance also. But they would face the same unaffordable premiums that Americans will face and would need federal subsidies to pay for it. That’s not going to happen.

The better solution would be to eliminate the individual and the employer mandates. That step would level the playing field for low-skilled RPI and American workers, by making Americans less costly to hire.

Immigration reform is fraught with challenges, and ObamaCare is exacerbating them. It may be that before we are able to adequately address immigration reform, we will have to kill the worst provisions of the Affordable Care Act.

Merrill Matthews is a resident scholar at the Institute for Policy Innovation in Dallas, Texas. Follow at http://twitter.com/MerrillMatthews

I have spent 25 years working in nonprofit think tanks, the last 17 as a resident scholar with the Institute for Policy Innovation in Dallas. I also ran the Washington, D.C.-based Council for Affordable Health Insurance for nearly nine years. While I cover a range of politic...